Wirtschaft und Gesellschaft
42. Jahrgang (2016), Heft 4
Different institutional variables appear to be relevant for each country.
Germany exhibits the most robust positive effect of union density on the
wage share, and there is also some positive effect of union density in Austria, while collective bargaining coverage plays a more important role in
France and the UK together with social government spending.
Financialisation, as captured by household debt, had the most pronounced effect in Austria, the UK and the US, while financial income appears to be relevant in Germany. Estimations for other countries are inconclusive and require analysis using data on a more disaggregated level.
We find mixed results for the effect of personal income inequality on the
wage share. However, there is indicative confirmation for a negative effect
in Austria, Germany and the UK.
While variables capturing technological change are significant in selected specifications for Austria, Italy and the US, they do not appear to be
very robust to the application of different estimation techniques or the split
of the sample in services and manufacturing sectors. Furthermore, we do
not find strong evidence of skill-bias in terms the effect of technological
change, which constitutes the core of the mainstream explanation for increasing inequality. For some specifications we observe that these variables are especially sensitive to the inclusion of country-level measures of
financialisation or bargaining power. However, these results are not robust
to the application of different estimation methodologies. This suggests that
while technological change surely has increased value added, the negative impact on the wage share is more likely to be an effect of reduced bargaining power of workers, brought about by globalisation and a deterioration of bargaining conditions.
6. Conclusion
Our findings lend strong support to the political economy approach to
functional income distribution. Technological change had an impact, especially in Austria, Italy, the US, but the effects are not robust with respect to
the use of different specifications and the wage share in most countries in
our sample appears to be driven by different variables reflecting the bargaining power of labour such as union density, adjusted bargaining coverage and government spending. Furthermore, we don’t find strong support
for the skill-biased technological change hypothesis which implies an adverse effect for low skilled workers and a beneficial effect for high-skilled
workers. Indeed, the high significance of institutional variables suggests
that the negative effect of technological change on income distribution
stems from the fact that workers weren’t able to capture the gains of increased productivity due to a weak bargaining position. In terms of eco582